EMC and Dell shake hands on storage pact

"Dell is very much of a dark horse in this market..."

By John G Spooner

EMC and Dell will outline details of a new storage system later today.

Nearly a year after striking a wide-ranging partnership for developing and selling storage systems, the two companies are ready to launch the Dell-EMC CX600, a large storage system for tasks such as data backup, email or video streaming.

With the CX600, Dell will "move up into the enterprise space and target some markets they haven't targeted before," said Russell Bailey, senior manager for storage product management at Dell. "Our goal is to increase [market share], and our hope and philosophy is that if we can increase storage share ... we can increase our overall revenues."

Boosting storage sales is important to Dell's goal of doubling total revenue in the next few years. Dell's plan includes expanding efforts in the consumer market and possibly printers and personal digital assistants (PDAs).

But the potential profit is far larger for selling services, hardware and communications equipment to corporate America, which is Dell's playground, said Walter Winnitzki, analyst at First Albany.

Those connections will be important for EMC. Once touted as one of the "four horsemen" of the Internet, the company's stock price and profits have sagged with the declining market and a surge of competition from IBM, Japanese conglomerates and HP.

The CX600 follows Dell's strategy of undercutting the competition on price to quickly gain market share.

An entry-level CX600 installation will cost about $98,000, cheaper than an equivalent EVA SAN system from HP, Bailey said. Although this is Dell's list price, such hardware often sells for less through negotiated deals.

The CX600, to be manufactured by EMC, will be compatible with current EMC hardware and software, letting customers use the new equipment with gear already installed. It uses a 2-gigabit Fibre Channel connection to send and receive data.

Dell estimates the worldwide storage market is worth $33.9 billion. With the new product, the company says it can address all but the very peak of the market, about $29 billion worth, essentially doubling its opportunity in the marketplace.

Analysts believe that Dell, which isn't a particularly large storage player, could use the EMC relationship to become a top seller in the market.

"Dell has been an up-and-comer. It's got terrific position in the server marketplace," said John Webster, analyst with Data Mobility Group. "The challenge is to translate that into the storage marketplace."

That will take time. So far, Dell has done the best with network-attached storage, which is less specialized, less expensive and fits better with the company's business model, Webster said.

"I think Dell is very much of a dark horse in this market, in that it could be a strong and influential player because of the breadth of its coverage and strength in Windows (servers)."

John G Spooner writes for News.com
News.com's Michael Kanellos contributed to this report